Steel industry demands export ban, objects to zero import tariffs
Dewi Santoso, The Jakarta Post, Jakarta
The government should ban steel exports rather than increasing import tariffs to overcome the supply shortages in the domestic market, an industrial executive said.
The marketing director of state-owned PT Krakatau Steel, Kemal Masduki, said on Friday that lifting tariffs was not a wise decision as it would only hurt the industry both upstream and downstream, and would cause second-grade steel from other countries to enter the local market.
"If the tariffs are reduced to zero percent, defective secondary products will enter the country at much lower prices," Kemal said.
Minister of Industry and Trade Rini M.S. Soewandi announced on Wednesday the government, in response to steel shortages around the world, planned to lift import tariffs on steel to help ease the burden on local companies that used steel as raw material.
Currently, the import tariffs on steel stand at 20 percent for hot rolled coil (HRC) and 25 percent for cold rolled coil (CRC).
Kemal expressed fear that steel from China and India could swamp the country, as the Chinese government gave companies an incentive of 15 percent for exports, and the Indian government 10 percent.
He explained that Indonesian steel producers now sell 90 percent of their products on the local market and export the remainder.
"If exports are banned, then the 10 percent of local production that is currently exported can be directed to the domestic market," he told The Jakarta Post.
He acknowledged that even if there was an export ban, Indonesia would still have to import steel as local production could not meet local demand.
South Korea, which also faces a shortage of steel in its domestic market, has implemented an export ban.
Worldwide steel shortages, driven by the bullish economy in China and reconstruction in Iraq, have caused the global prices of steel products to rise by more than 100 percent to an average of US$630 per ton from $310 per ton in December last year.
Kemal said the international price of HRC had increased by 93 percent to $580 per ton from $300 last year, and the price of CRC had increased by 46 percent to $630 per ton from $430.
He said the increase in global prices had caused an increase in the domestic prices of HRC and CRC.
The domestic price of HRC now stands at about Rp 5,000 (58 US cents) per kilogram, up 53 percent from Rp 3,250 last year. The price of CRC has reached Rp 6,000 per kilogram, up 33 percent from Rp 4,500 last year.
"The prices keep changing every month, making it difficult to sign deals with buyers, including pipe producers," Kemal told the Post, adding that he was pessimistic things would improve soon. "At least not within the next three months."
The secretary-general of the Indonesian Steel Pipe Association, Untung Yusuf, said he had to increase the prices of his products by an average of 30 percent during the last three months due to rising international prices.
He said that currently the price of pipe was about $773 per ton, and could rise to as high as $900.
"It has been a month since we have had any transactions because the prices have skyrocketed. And with no import tariffs, it will be easier for second-grade foreign products to come into the country at cheaper prices, threatening our industry with bankruptcy as we can't compete with those prices," Untung said.